Chart Could Hold Key To Fed's Next Big Move
|Although I’ve projected a further 3.3% drop in the E-Mini S&Ps over the near-term, we should remain open to the possibility of a stock-market reversal on Tuesday that would kick off the increasingly prayed-for Santa rally/dead-cat bounce. The chart shows what would need to happen to trip the bullish signal. Specifically, the March contract would need to push above the small peak at 2616.75 that is labeled in red. Although that would generate only a minor bullish impulse leg on the ‘hourly’ bars, the timing of it a day ahead of the Fed’s big announcement on Wednesday could hold particular significance.
Tightening ‘Expected’ — But by Whom?
The central bank is expected to tighten one more time this year, but there are reasons to think such ‘expectations’ don’t actually exist — that they are merely being assumed by a mainstream media too lazy and stupid to provide a statistical basis for them. If the Fed “surprises” by not tightening — presumably because they, too, can see that the stock market is falling apart, and that Europe and Asia are sliding into recession — it will send U.S. shares soaring on Wednesday. The news would also produce a major shift in market psychology, since investors’ focus would change from anxiety about when the next tightening is coming, to “When will QE5 commence?” The foregoing is admittedly a lot to infer from so simple an event as a rally above an obscure peak on an intraday chart. But we have nothing to lose from watching and being prepared for a bullish jolt, and much to gain if we are a day ahead of it.
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